Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

GSTHST Info Sheet by kqn14609

VIEWS: 1 PAGES: 5

									GST/HST Info Sheet


GST/HST Rate Reduction and Purchasers of New Housing                                                         July 2007

This info sheet replaces the previous version dated May 2006. Significant changes have been side-barred.

This info sheet explains the transitional rules for the          part of the federal portion of the HST and the
GST/HST rate reduction that apply to purchases of                GST/HST transitional rebate. Note: the calculation
new housing in Canada. It also explains when a                   for the GST/HST transitional rebate does not take
person may claim a GST/HST transitional rebate on                into account the Nova Scotia new housing rebate
the purchase of a new house and the procedure for                since it only relates to the federal part of the HST.
obtaining the rebate.                                            For more information on the GST/HST new housing
                                                                 rebates, including the Nova Scotia rebate, refer to
In this document, a “house” includes a single family             the guide RC4028, GST/HST New Housing Rebate.
home, a semi-detached house, a duplex, a
townhouse, a residential condominium unit, a                     Application of GST/HST – general rule
mobile or modular home and a floating home.
                                                                 Effective July 1, 2006, under proposed legislation,
Where this document refers to an agreement entered
                                                                 the GST rate will be reduced from 7% to 6%, and
into before May 3, 2006, the agreement must be
                                                                 the HST rate from 15% to 14%.
evidenced in writing. A purchaser of a new house is
required to have evidence in writing of the purchase
                                                                 Generally, the new rates of tax apply to the supply
agreement in order to claim a GST/HST transitional
                                                                 of taxable (other than zero-rated) goods and services
rebate.
                                                                 in the following circumstances:
The HST applies only to supplies made in or
imported into a participating province (Nova Scotia,             •   If the GST/HST becomes payable after June 30,
New Brunswick or Newfoundland and Labrador).                         2006 without having been paid before that day,
The GST applies to supplies made in or imported                      GST/HST applies at the rate of 6% or 14%.
into the rest of Canada. If you are uncertain as to
whether a supply is made in a participating                      •   If the GST/HST is paid after June 30, 2006
province, refer to the Technical Information Bulletin                without having become payable before that day,
B-078, Place of Supply Rules under the HST,                          GST/HST applies at the rate of 6% or 14%.
available from any Canada Revenue Agency (CRA)
tax services office.                                             If the GST/HST becomes payable or is paid without
                                                                 having become payable before July 1, 2006, the
If your house is located in Nova Scotia, you may be              GST/HST will apply at the rate of 7% or 15%.
entitled to claim the Nova Scotia new housing rebate             There are special transitional rules for real property
for a part of the provincial portion of the HST. This            transactions, particularly sales of new housing, and
rebate is in addition to the new housing rebate for a            including deemed sales. In addition, a GST/HST


GI–015




La version française de ce document est intitulée –
Réduction du taux de la TPS/TVH et les acheteurs d’habitations
neuves.
GST/HST Rate Reduction and Purchasers of New Housing


transitional rebate may be available to take into       GST/HST will apply at the rate of 7% or 15%.
account the GST/HST rate reduction where the            However, since both ownership and possession are
agreement for the purchase of a new house was           transferred after June 30, 2006, you may claim a
entered into before May 3, 2006. This rebate is         GST/HST transitional rebate.
explained later in this info sheet.
                                                        Agreement of purchase and sale entered
Application of GST/HST to purchases of                  into after May 2, 2006
new housing
                                                        If you enter into an agreement after May 2, 2006, for
In general, GST/HST at the rate of 6% or 14% will       the purchase of a new house, the GST/HST rate that
apply to a taxable purchase of real property where      applies on the purchase will depend on when
both ownership and possession are transferred after     ownership and possession are transferred. Note: a
June 30, 2006. Special transitional rules apply to      GST/HST transitional rebate is not available for
purchases of new housing that straddle the              agreements entered into after May 2, 2006.
July 1, 2006 effective date.
                                                        Ownership or possession transferred before
Agreement of purchase and sale entered                  July 1, 2006 ─ GST/HST applies at 7% or 15%
into before May 3, 2006                                 You enter into an agreement after May 2, 2006, for
If you entered into an agreement before                 the purchase of a new house. The closing date for
May 3, 2006, for the purchase of a new house,           the purchase is June 25, 2006. Ownership of the
GST/HST will apply at the rate of 7% or 15%.            house transfers to you on June 25, 2006. Since
However, you may be entitled to a GST/HST               ownership of the house is transferred to you before
transitional rebate if you paid GST/HST at 7% or        July 1, 2006, GST/HST will apply at the rate of 7%
15% and both ownership and possession of the            or 15%. If either ownership or possession is
house are transferred to you after June 30, 2006.       transferred before July 1, 2006, GST/HST will apply
                                                        at the rate of 7% or 15% and a GST/HST
Ownership or possession transferred before              transitional rebate is not available.
July 1, 2006 ─ GST/HST applies at 7% or 15%
                                                        Both ownership and possession transferred
You entered into an agreement before May 3, 2006,       after June 30, 2006 ─ GST/HST applies at 6% or
for the purchase of a new house. The closing date       14%
for the purchase is July 15, 2006. You make
                                                        You enter into an agreement after May 2, 2006, for
arrangements with the builder to take possession of
                                                        the purchase of a new house. The closing date for
the house on June 10, 2006, but ownership of the
                                                        the purchase is August 30, 2006. Ownership and
house does not transfer to you until July 15, 2006.
                                                        possession of the house transfer to you on
Since you take possession of the house before
                                                        August 30, 2006. Since both ownership and
July 1, 2006, GST/HST will apply at the rate of 7%
                                                        possession are transferred after June 30, 2006, and
or 15%. You are not entitled to a GST/HST
                                                        the agreement was entered into after May 2, 2006,
transitional rebate under these circumstances.
                                                        GST/HST will apply at the rate of 6% or 14%.
Both ownership and possession transferred
after June 30, 2006 ─ GST/HST applies at 7% or          Changes to an agreement of purchase and
15% and GST/HST transitional rebate                     sale
You entered into an agreement before May 3, 2006,       Generally, changes to an agreement to provide for
for the purchase of a new house. The closing date       upgrades will not have an impact on these
for the purchase is July 20, 2006. Ownership of the     transitional rules.
house transfers to you on the date of closing. You
also take possession of the house on that date. Since   For example, if your agreement provides for
the agreement was entered into before May 3, 2006,      standard kitchen cabinets and you ask the builder to


2                                                                          GST/HST Info Sheet (July 2007)
                                                      GST/HST Rate Reduction and Purchasers of New Housing


upgrade to deluxe cabinets, the additional amount            credit an amount to you for this rebate. You have to
that the builder charges for the upgrade will be an          send an application for the transitional rebate
additional amount payable for the house. You are             directly to us and we will pay the rebate amount to
not considered to have entered into a new agreement          you.
as a result of such a change and there would be no
impact on the application of the transitional rules. If      Generally, the GST/HST transitional rebate provides
the agreement was entered into before May 3, 2006,           for a rebate to a purchaser of new housing to
and both ownership and possession are transferred            account for the 1% reduction in the GST/HST rate
to you after June 30, 2006, GST/HST will apply at            in certain circumstances where tax was paid at the
the rate of 7% or 15% on the total amount payable            rate of 7% or 15%. The transitional rebate is only
for the house, including the upgrade. In this case,          available if you take ownership and possession of
you would claim a GST/HST transitional rebate.               your new house after June 30, 2006, but paid
When determining the amount of the rebate, the               GST/HST at the rate of 7% or 15% because you
total amount paid for the house includes the                 entered into an agreement of purchase and sale
additional amount paid for the upgrade.                      before May 3, 2006.

However, where an existing agreement is modified,            The GST/HST transitional rebate is not available if
varied or otherwise materially altered to such an            you are entitled to claim an input tax credit (ITC) in
extent that it is considered to be a new agreement,          respect of the purchase of the new house.
the application of the transitional rules will be based
on the date that the new agreement is entered into,          The GST/HST transitional rebate is available for
as well as the dates that possession and ownership           most purchases of new housing, regardless of the
are transferred under that new agreement. Reference          purchase price. The transitional rebate is not
should be made to the draft policy statement entitled        conditional on a purchaser’s entitlement to other
Agreements and Novation, released on                         GST/HST new housing rebates. However, where a
June 27, 2005.                                               purchaser is entitled to another GST/HST rebate, the
                                                             transitional rebate will take into account that other
If you and a builder renegotiate the terms of an             rebate (e.g., GST/HST new housing rebate or
agreement that was entered into before May 3, 2006,          GST/HST new residential rental property rebate).
for the purchase of a new house, and enter into a
new agreement after May 2, 2006, the transitional            Mr. and Mrs. Green buy a new house from a builder for
                                                             $344,784 (consideration is $330,000, GST is $23,100 and
rules will apply based on the new agreement. For             the GST/HST new housing rebate is $8,316). The
example, if you entered into an agreement before             agreement of purchase and sale is signed on
May 3, 2006, to purchase a new house and you and             April 28, 2006. Both ownership and possession will
                                                             transfer to Mr. and Mrs. Green on August 1, 2006. Since
the builder renegotiate the terms of the agreement on        the house is purchased for use as their primary place of
June 1, 2006, and enter into a new agreement on that         residence, the purchasers will be eligible to claim a
                                                                                                       1
day, the GST/HST will apply at the rate of 6% or             GST/HST new housing rebate of $8,316 provided all of
14% if both ownership and possession, under the              the other conditions for claiming the new housing rebate
                                                             are met. The purchasers and builder agree to have the
new agreement, are transferred to you after                  builder credit the amount of the GST/HST new housing
June 30, 2006. Furthermore, you will not be entitled         rebate to the purchasers at the time of purchase.
to claim the GST/HST transitional rebate.
                                                             Since the agreement of purchase and sale was signed
                                                             before May 3, 2006, and both ownership and possession
GST/HST transitional rebate
                                                             are transferred after June 30, 2006, GST on the purchase
Any person, including an individual, a non-profit
                                                             1
organization or a corporation, who purchases a new             The GST/HST new housing rebate is 36% of the GST paid (or the
                                                             federal part of the HST paid). The maximum rebate available is $8,750
house in Canada, may be eligible to claim a                  under 7% GST (15% HST) and $7,560 under 6% GST (14% HST). The
GST/HST transitional rebate. If you are entitled to          rebate is phased-out for houses priced between $350,000 and $450,000.
                                                             The GST/HST transitional rebate is the only rebate available for houses
claim the transitional rebate, a builder cannot pay or       priced at $450,000 and above.



GST/HST Info Sheet (July 2007)                                                                                                   3
GST/HST Rate Reduction and Purchasers of New Housing


will apply at the rate of 7%. However, the purchasers will   agreement before May 3, 2006, for the purchase of
also be entitled to claim a GST/HST transitional rebate.
The amount of the transitional rebate will be adjusted to
                                                             the house and lease of the land, possession is given
take into account the GST/HST new housing rebate of          to you after June 30, 2006, and the builder had to
$8,316, which was credited by the builder at the time of     self-assess GST/HST at 7% or 15%. In the case of a
the purchase. Mr. and Mrs. Green will be entitled to claim   purchase of a unit in a multiple unit residential
a transitional rebate of $2,112 based on the following
formula:
                                                             complex and lease of land, you would qualify for the
                                                             rebate if the builder had to self-assess GST/HST at
         A × [0.01 – ((B ÷ A) ÷ 7)]
                                                             7% or 15% and possession of a unit in the complex
Where                                                        was given to you after June 30, 2006.
A = Consideration paid for the house ($330,000)
B = Amount of the GST/HST new housing rebate ($8,316)        Application for the GST/HST transitional
                                                             rebate
The GST/HST transitional rebate available to Mr. and
Mrs. Green is equal to $2,112, as follows:                   To claim a GST/HST transitional rebate, you have
          $330,000 × [0.01 – (($8,316 ÷ $330,000) ÷ 7)]      to complete application Form GST193, GST/HST
        = $330,000 × [0.01 – (0.0252 ÷ 7)]                   Transitional Rebate Application for Purchasers of
        = $330,000 × [0.01 – 0.0036]                         New Housing, and file it with us. A copy of the
        = $2,112                                             application form is available on our Web site or may
                                                             be obtained by calling 1-800-959-2221.
Ms. White buys a new luxury condominium from a builder
for $575,000 (consideration is $500,000, HST is $75,000).    Unlike the GST/HST new housing rebate, which can
The agreement of purchase and sale was signed on             be paid or credited to a purchaser of a new house by
April 3, 2006. The closing date for the purchase of the
                                                             the builder at the time of purchase, a purchaser has
condominium is October 2, 2006. Both ownership and
possession will transfer to Ms White on October 2, 2006.     to file the application for the GST/HST transitional
                                                             rebate directly with us and we will pay the
Since the agreement of purchase and sale was signed          transitional rebate amount to the purchaser. The
before May 3, 2006, HST on the purchase will apply at the
rate of 15%. However, since both ownership and
                                                             builder cannot pay or credit this rebate.
possession are transferred after June 30, 2006, Ms White
will be entitled to claim a GST/HST transitional rebate.     If a GST/HST new housing rebate is available for
Because the purchase price of the condominium is more        the purchase of a house, the same individual who
than $450,000, Ms White is not entitled to claim a
GST/HST new housing rebate. Ms White will be entitled to     claimed the GST/HST new housing rebate (i.e., the
claim a transitional rebate of $5,000, based on the          individual who signed the application) has to claim
following formula:                                           the GST/HST transitional rebate and send it to us. If
                            A × 1%                           you and your spouse purchased a new house and
Where                                                        your spouse claimed the GST/HST new housing
A = Consideration paid for the condominium ($500,000)        rebate, only your spouse can claim the GST/HST
                                                             transitional rebate.
The GST/HST transitional rebate available to Ms White is
equal to $5,000, as follows:
                                                             You cannot claim the GST/HST transitional rebate
           $500,000 × 1%                                     until you meet all of the conditions. For example,
         = $5,000
                                                             you must have paid all of the GST/HST payable on
                                                             the purchase of the house. You have to file the
If you purchased a house or a unit in a multiple unit        rebate application with us within two years after the
residential complex where the builder sells you the          day that ownership of the house is transferred to
building, or part of the building, and leases you the        you. You also have to attach a copy of the purchase
land (or assigns a lease of the land) on which the           and sale agreement, the statement of adjustments
house or unit is situated, you may also be eligible to       and a copy the GST/HST new housing rebate that
claim a GST/HST transitional rebate. You would               you claimed.
qualify for the rebate if you entered into the



4                                                                               GST/HST Info Sheet (July 2007)
                                                                GST/HST Rate Reduction and Purchasers of New Housing


If the builder paid or credited you the new housing                         the land part of the property where the builder sells
rebate, you may ask the builder for a copy of the                           a house and leases the land. In this case, the builder
rebate application if you do not have a copy.                               has to complete application Form GST192,
                                                                            GST/HST Transitional Rebate Application for
If you are entitled to the new residential rental                           Builders of New Housing on Leased Land, and file it
property rebate, attach a copy of your rebate                               with us.
application.
                                                                            There are also variations to the formula for
This info sheet explains the most common                                    calculating the GST/HST transitional rebate for
GST/HST transitional rebates available. Other                               certain purchases such as the purchase of a house by
transitional rebates are available in certain                               a public service body (PSB) that is entitled to claim
circumstances. For example, a cooperative housing                           a PSB GST/HST rebate. The amount of the
corporation (co-op) that purchases a residential                            GST/HST transitional rebate will take into account
complex may be entitled to claim a transitional                             the amount of the PSB rebate.
rebate. If eligible, the co-op would complete
application Form GST193, follow the instructions to                         For more information on the GST/HST transitional
calculate the transitional rebate amount using the                          rebate please call 1-800-959-8287.
appropriate formula, and file it with us.

In limited circumstances, a builder may be entitled
to claim a GST/HST transitional rebate in respect of



This info sheet does not replace the law found in the Excise Tax Act (the Act) and its Regulations. It is provided for your reference. As it
may not completely address your particular operation, you may wish to refer to the Act or appropriate regulation, or contact any CRA
GST/HST Rulings Centre for additional information. These centres are listed in GST/HST Memorandum 1.2, Canada Revenue Agency
GST/HST Rulings Centres. If you wish to make a technical enquiry on the GST/HST by telephone, please call the toll-free number 1-800-
959-8287. A ruling should be requested for certainty in respect of any particular GST/HST matter.

This info sheet reflects changes to the Act announced by the Minister of Finance on May 2, 2006, and included in Bill C-13, the Budget
Implementation Act, 2006, which received second reading on May 19, 2006. Any commentary in this info sheet should not be taken as a
statement by the CRA that these amendments will be enacted in their current form.

If you are located in the province of Quebec and wish to make a technical enquiry or request a ruling related to the GST/HST, please
contact Revenue Québec by calling the toll-free number 1-800-567-4692.

All GST/HST publications are available on the Internet at the CRA site at www.cra-arc.gc.ca/tax/technical/gsthst-e.html.




GST/HST Info Sheet (July 2007)                                                                                                            5

								
To top